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Solar Funding Up 11% As Energy Storage Sees Sharp Decline – Mercom Report | |
| Radhika Laghate |
While solar continues to perform well, some investors are hesitant to buy into high-priced and overvalued areas, preferring to wait and see. It is also possible that solar could experience slower investment next quarter while interest in other sectors, such as energy storage, picks up again.
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In the first quarter of 2023, corporate funding for energy storage companies fell to $2.2 billion from $12.9 billion in the same period last year, while funding for solar companies increased by 11% year-over-year, according to data from Mercom Capital Group.
Despite a general slowdown in most sectors, venture capitalists continue to be drawn to solar projects and technologies. Raj Prabhu, Mercom's CEO and co-founder, suggested that the Inflation Reduction Act may be partly responsible for solar's success, although it is unclear whether the sector will continue to outperform the economy-wide trend.
Investors Betting On Solar, But Recession Could Lead To Issues
Investors are betting on solar and other clean energy sectors to grow, given Europe's acute interest in energy independence and the war in Ukraine. However, a potential recession, financial issues, and interconnection challenges could lead to some "choppy" quarters for solar companies in the future. While solar continues to perform well, some investors are hesitant to buy into high-priced and overvalued areas, preferring to wait and see. It is also possible that solar could experience slower investment next quarter while interest in other sectors, such as energy storage, picks up again.
Overall, only solar and artificial intelligence are performing well, with most other sectors tanking, according to Prabhu. Total energy storage funding, including venture capital, public market financing, and debt financing, decreased from $12.9 billion in Q1 2022 to $2.2 billion in the first quarter of this year. However, Prabhu noted that LG Energy Solution's $10.7 billion IPO during Q1 2022 skewed the year-over-year figures. Similarly, total funding for smart grid companies has decreased by 42% since the end of last year. Prabhu warns that the market fundamentals suggest a continued growth trajectory for solar and other clean energy sectors, but it remains to be seen how economic conditions and other factors will affect the industry's performance in the years ahead.